PARK 24 Co., Ltd.: To Our Shareholders
Our basic philosophy:
■ Parking lots aren't just spaces for parking cars.
They are areas offering superb amenities for cities and city-dwellers!
Real estate price trends in
the fiscal year under review seemed
to indicate that Japan's economy
was contracting at a slower rate.
However, as asset values continue
to drop, a major deflationary spiral
seems increasingly possible. One
effect of this has been a slowdown
in foreign real estate investment,
which had been stimulating the economy.
Regular real estate transactions
remain in the doldrums.
Throughout this period, however,
awareness of the short-term parking
facility industry and its ability
to solve chronic parking shortages
has increased. Park 24 parking facilities
have become increasingly visible
in the urban landscape as the industry
has steadily grown.
In addition the parking equipment
sales industry has had steady sales
for the past five years despite
the low level of private facility
and equipment investment. However,
the worsening recession has recently
caused growth to turn negative.
Annual capacity developed, in terms
of number of vehicles handled, is
down 3%. However, demand has remained
steady for automated vertical parking
facilities and this sector is in
relatively good shape to await economic
recovery.
Sales increased 11.4% from the
previous fiscal year to \20.892
billion. Recurring profit was \1.51
billion, an increase of 11.5%. Net
income rose 6.6% to \724 million.
■ Management Strategy
Park 24's "Times"
coin-operated parking system was
well-matched to driver needs and
sales grew rapidly. We are pleased
that Park 24 has made a significant
(if low-profile) contribution to
driving conditions in Japan. "Times"
system parking continues to be installed
as quickly as possible to reach
Park 24's goal of 40,000 spaces.
As this occurs, operations which
are not profitable will be closed
down in accordance with our "scrap
and build" policy. Park 24
will also continue to expand our
parking facility management business.
Park 24 has developed model high-yield
parking management operations to
demonstrate to owners of parking
businesses. Achieving this required
large-scale facility investment
which exceeded cash flow for fiscal
years ending in October 1997 and
in October 1998. However, future
facilities investment will be kept
within the cash flow as has been
the policy in the past.
Park 24 also plans to use the
"Times" brand and the
merit of scale to develop high value-added
parking operations in which parking
is a service business. Beyond being
simply a car-parking space, a parking
facility has great convenience and
utility. Park 24 intends to develop
high added value parking facilities
with new functions.
To deal with the problem of non-payment
at unattended parking facilities
Park 24 established the Times Service
Co., Ltd. in November 1988. This
company will efficiently monitor
parking facilities to improve profitability.
These strategies will both differentiate
the Company from competition and
improve return on investment.
■ Mid Term Outlook
As the economy returns to
growth in the future, real estate
assets will become increasingly
liquid. In this environment development
of parking operations which will
provide stable, long-term revenues
will be an urgent issue. Park 24
is taking several initiatives to
meet this challenge.
The first is the Private Finance
Initiative (PFI) in which private
capital finances community parking
facilities. Consultant companies
are necessary to attract this capital,
and Park 24's extensive facility
management and know-how makes us
attractive partners to several of
the larger general construction
companies. Joint agreements to develop
these kind of projects will increase
long-term stability and will also
lower financing costs, which will
result in increased stability and
profitability. Park 24 is presently
studying the possibility of establishing
a special purpose company (SPC)
and how best to structure the contracts
for managing this type of facility.
By operating 40,000 parking spaces
and exploiting the opportunities
described above, Park 24 hopes to
achieve contract cancellation of
less than 10% initially and less
than 5% over the long term. This
will increase recurring profit to
over 10% of total sales.
■ Shareholder Policy
Park 24's forward-looking policies
ensure that shareholders earn acceptable
returns. We declared a 1:1.3 stock
split in October 1997. At the same
time a \2 commemorative dividend
was added to the usual \10 dividend
per share. In the fiscal year ended
October 1998, this commemorative
dividend was converted into regular
dividend and the dividend was increased
\1. The total dividend was thus
\13, up from \12 a year earlier.
The Company intends to increase
the dividend per share as profits
increase.
We would like to take this opportunity
to thank our stockholders for their
continued support in developing
the business.
Kiyoshi Nishikawa
President